Nintendo has almost sold 20 million Switch game consoles, but momentum is slowing

Nintendo

• Nintendo’s Switch game console is still doing very
  well, with nearly 20 million units sold worldwide.
• Second-year sales are down for the console — momentum
  has seemingly slowed with Switch sales.
• The Japanese game company’s stock is also taking a hit,
  but it would be a mistake to count out
  Nintendo.
   

It’s a complicated time for Nintendo.

The Japanese game giant’s newest console, the Switch, is a hit —
but it’s losing momentum due to a lackluster second year line-up
of major Nintendo-made games. 

The Switch’s first year was packed with top-level blockbuster
games, starting with “The Legend of Zelda: Breath of the Wild” at
launch in March 2017, and “Super Mario Odyssey” bookending 2017
in time for the holidays. And that’s without mentioning games
like “Splatoon 2,” “Mario Kart 8 Deluxe,” and “ARMS.”

The second year, by comparison, is a massive drop-off.

“Kirby Star Allies” was the first major Nintendo
release on the Switch in 2018.
Nintendo

Games like “Kirby Star Allies” (above), “Captain Toad Treasure
Tracker,” and “Mario Tennis Aces” — highlights for 2018 thus far
— have failed to excite Switch owners and critics alike. The
biggest game to launch on Nintendo’s Switch in 2018 is the
biggest game in the world, “Fortnite,” which can be played on
nearly every other game platform.

As a result, sales of the Switch console in its second year are
down: Nintendo sold 1.88 million consoles between April 1 and
June 30, 2018. That’s approximately 100K units less than the
previous year’s quarter.

At the same time, the latest financial data puts the Switch on
track to reach 20 million total consoles sold worldwide any
minute now — an incredibly impressive number for a console that’s
only been available for about 15 months. 

And games like “Mario Kart 8 Deluxe” are selling incredibly well.
For every two Switch consoles sold, one copy of “Mario Kart 8
Deluxe” is sold.  

Games like “Mario Kart 8 Deluxe” bolstered Nintendo’s
Switch line-up in its first year.
Nintendo

Long term, sales of “Mario Kart 8 Deluxe” will no doubt continue.

It’s a series with notoriously long legs, that anyone who buys a
Nintendo Switch at any point may purchase. But Nintendo needs
big new games to sustain and increase interest, and
it needs them on an ongoing basis.

In 2018, Nintendo has failed at that objective thus far, and the
second half of the year isn’t looking much better.

Here’s Nintendo’s line-up for the rest of the year based on what
we know right now:

1. “Super Smash Bros. Ultimate” — the next entry in the
long-running Nintendo fighting game series which features an
all-star cast of gaming characters.
2. “Pokémon: Let’s Go, Eevee!” and “Pokémon: Let’s Go, Pikachu!”
— an updated re-master of “Pokémon Yellow” that comes in two
slightly different versions.
3. “Super Mario Party” — the next entry in the
multiplayer-focused minigame series starring Nintendo characters.

Things could change between now and next March, when Nintendo’s
fiscal year ends. Nintendo could announce major new games coming
to the Switch, and momentum could return.

That’s unlikely for at least one good reason: Major game
companies tend to announce holiday launches well ahead of time,
allowing for a marketing build-up. Such is the case with
Nintendo’s holiday blockbuster duo of “Super Smash Bros.
Ultimate” and the twin Pokémon “Let’s Go!” games.

“Super Smash Bros. Ultimate” is one of two major
holiday game launches on the Switch this year. It arrives on
December 7.
Nintendo

It was always going to be hard for Nintendo to top 2017 — a year
with major new “Mario” and “Legend of Zelda” games — but 2018’s
comparative game line-up is a return to the Wii U years of B-tier
games sporadically launching. At very least, it’s a far cry from
the near-monthly game release cadence of 2017.

Worse, Nintendo set a nearly impossible goal for itself:
Executives projected sales of 20 million Switch units in the
second fiscal year. As Wedbush analyst Michael Pachter told
me in an email this week, “That sounds implausible to me.”

He’s got good reason to believe as much: Nintendo sold just 1.88
million consoles in its first financial quarter of the year, and
would have to sell another 18.12 million
consoles in the next nine months to meet its own goal.

According to Pachter, Nintendo is betting on the twin release of
“Pokémon: Let’s Go, Eevee!” and “Pokémon: Let’s Go, Pikachu!”
this November to massively bolster Switch console sales.

As Wedbush argued in a note following Nintendo’s financials
earlier this week, the “Let’s Go!” Pokémon spin-off games are
unlikely to move consoles the way Nintendo may expect. They’re
not main series Pokémon games — one is planned for the Switch in
“late 2019” — and they’re unlikely to attract huge audiences the
way that “Pokémon GO” did. 

In “Pokémon: Let’s Go,
Eevee!” and “Pokémon: Let’s Go, Pikachu!”, you capture Pokémon in
the same way you would in “Pokémon Go.” But the overall game is a
re-creation of “Pokémon Yellow.”
Nintendo

“‘Pokémon GO’ is free-to-play and requires nothing more than a
mobile phone or a tablet to play,” the note said. “In the case of
this fall’s Pokémon titles, the prospective player will be
required to buy both the game ($60 for one, or $120 for both) and
the Switch hardware (another $299 at current prices).”

Given the barrier to entry being far higher — both from a price
and gameplay perspective — it’s unlikely that the “Let’s Go!”
Pokémon games will attract anywhere near as many players as the
smartphone Pokémon game did. Thus, betting on them to help move
tens of millions of Switch consoles over the next nine months is
risky at best.

“I think that is exceptionally naïve,” Pachter said. “But we’ll
see.”

It’s for these reasons that Nintendo finds itself in a complex
position with the Switch. Sales are still brisk — the Switch
has now sold 7 million more units than its predecessor, the Wii
U, in a fifth of the time — but there’s not much new incentive to
buy the console.